Inland Revenue will soon be able to give tax refunds and chase up owed tax without people filing tax returns, under proposed changes announced by the Government.

The changes will cover people whose only income is from a salary, wages or investments.

They would no longer have to provide year-end income information to Inland Revenue or file tax returns.

Instead, Inland Revenue would use information it receives from third parties such as employers and banks - and automatically calculate and issue refunds or amounts of tax to pay.

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If a refund was owed, it would be deposited into a taxpayer's bank account automatically.

Under this proposed approach, Inland Revenue would have issued refunds to an extra 456,000 people in the 2015 tax year, and required 179,000 people to pay owed tax.

Inland Revenue would collect money owed through options including issuing a "notice to deduct" to an employer or bank, setting up an instalment arrangement with the taxpayer, or writing the debt off in cases of serious hardship.

Currently, if an individual files an income tax return that results in a refund or tax to pay, an obligation is created for payment. People who don't file returns do not have their tax situation assessed, and there is no payment obligation.

Finance Minister Steven Joyce and Revenue Minister Judith Collins have today released a consultation document, Better administration of individuals' income tax.

Collins said people who haven't worked a full year, have fluctuating earnings or have been taxed at the wrong rate could be owed a tax refund, or owe more tax, and not realise.

While this will result in some people being chased for owed tax, Joyce said the new system would mean people were less likely to end up with large bills at the end of the year.

"They'll be paying a more accurate amount through the year and receive any refunds automatically. This is good news for about 3 million taxpayers."

Another option put forward in the discussion document is the "improved status quo", where Inland Revenue would issue more personal tax summaries for people to confirm or complete. Submissions on the proposals close on July 28.

In the 2015 tax year, about 1.1 million people submitted a personal tax summary, and another 1.1 million filed an IR3 tax return form.